BNY Mellon To Pay $714 Million To Settle Forex Fraud Probe

(RTTNews) - Bank Of New York Mellon Corp. (BK) said Thursday it reached a $714 million settlement with the U.S. and the New York state to resolve charges of foreign exchange rate rigging. BNY Mellon said the settlements will be fully covered by its existing legal reserves.

Manhattan U.S. Attorney Preet Bharara said, "The Bank of New York Mellon's custody clients, many of whom are public pension funds and non-profit organizations, trusted the bank to be honest about the financial services it was providing and to deal with them fairly. BNYM and its executives, motivated by outsized profits and bonuses, breached this trust and repeatedly misled clients to believe that the pricing they were getting on foreign exchange was far better than it actually was."

The settlement resolves lawsuits bought in 2011 by the U.S. Department of Justice (DOJ), the New York Attorney General (NYAG), the U.S. Department of Labor and the U.S. Securities and Exchange Commission as well as private customer class actions on BNY Mellon's fraudulent foreign exchange practices.

"We are pleased to put these legacy FX matters behind us, which is in the best interest of our company and our constituents. We continue to improve our product offerings to ensure they are meeting client demand and positioning clients to succeed in an increasingly complex financial environment," the company said.

The charges relate to certain of the standing instruction foreign exchange services that BNY Mellon provided to its custody clients prior to early 2012 that saw the clients being fraudulently overcharged.

The New York-based world's largest custody bank has admitted that it promised customers the best price of the day on foreign exchange transactions, but instead gave prices at or near the worst interbank rates reported during the trading day. As part of the settlement, BNY Mellon agreed to end the employment of executives involved in the fraud.

The settlement will see BNY Mellon paying the DOJ and NYAG $167.5 million each, the department of labor will receive $14 million and the SEC will receive $30 million. The company has also agreed to pay $335 million to settle the customer class action litigation.

In mid-February, BNY Mellon adjusted its financial results for the fourth quarter to include an additional after-tax litigation expense of $598 million in anticipation of the resolution of several previously disclosed matters, including substantially all of the foreign exchange-related actions.

BK closed Thursday's regular trading session at $40.30, down $0.53 or 1.30% on a volume of 6.76 million shares.